(Reuters) - An experiment changing how U.S. cancer doctors
are compensated cut healthcare costs by a third, with no
discernible decline in patient health, according to a three-year
study by insurer UnitedHealth Group Inc and five medical
oncology groups.

Cancer treatment is one of the most expensive and fastest
growing categories of care in the United States. Oncologists and
insurers have been devising new incentives for doctors to
improve patient care while lowering costs.

In the latest experiment, UnitedHealth, the largest U.S.
health insurer, gave participating doctors an upfront payment to
cover a patient's full course of treatment, rather than
reimburse them for each individual medical service such as
chemotherapy. Findings from the study, which ran from 2009 to
2012, were published online on Tuesday in the Journal of
Oncology Practice.

At the five oncology groups in the study, medical costs for
810 patients with lung, breast and colon cancer were $65
million, versus $98 million for similar patients whose doctors
received standard payments. That represented a decline of three
times what the study had targeted.

"All the physician's work of caring for a patient in the
hospital was also bundled into the 'episode of care' fee. When
you bundle something, you tend to get less of it," said Dr.
Bruce Gould, medical director of the Northwest Georgia Oncology
Centers in Marietta, Georgia and a study author.

In standard practice, medical groups are paid on a
fee-for-service basis for doctor visits, hospital stays, and
imaging. They also receive reimbursement for the cost of
chemotherapy drugs, plus a percentage of that cost.

In the UnitedHealth study, doctors instead received an
upfront payment per case, and no extra payments based on
chemotherapy use. A fee-for-service payment to doctors
associated with hospital stays was also eliminated.

The lower costs were the result of fewer radiation
treatments and imaging as well as fewer hospital stays, which
are often due to illness from the effects of chemotherapy, the
authors said.

At the same time, the costs of chemotherapy spiked
unexpectedly by 179 percent to $21 million, compared to $7.5
million for the standard payment group. The program had hoped
for the opposite effect, expecting that by ending payments for
each chemotherapy treatment doctors would have less incentive to
overuse it. Those payments are larger if the drugs used are more
expensive.

It was not clear if the chemotherapy costs rose because drug
prices rose or because doctors administered more treatments.

The oncology groups also standardized some of the ways they
delivered care after semi-annual, in-person discussions on best
practices, the authors said.

For example, one group lowered its hospital stay rate for
cancer patients by scheduling follow-up appointments within 48
hours for patients suffering chemo side effects such as nausea
and diarrhea. That cut hospital stays by delivering treatment
before the conditions became critical.